Retail. 4 th QUARTER REPORT 2010

Transcription

1 Retail 4 th QUARTER REPORT 2010

2 At A Glance Vacancy rates remain stable - Overall vacancy rates showed a slight increase during the quarter to 13.09%. This is a 0.10% rise from 3rd quarter 2010 and a raise from a year ago at 13.02%, 4th quarter Anchorless Strip product type is showing the highest vacancy rates at 19.63%. Rents fall again - As Landlords are faced with a Tenant market, they are seeing many retailers renegotiating for lower rents and asking for more concessions as their leases come up for renewal. Negotiations like these and more up-front incentives help stabilize and even lower the overall average lease rates. Currently, the Las Vegas market is showing annual averages lease rates at $1.60 per square feet (psf ). This is a drop from last quarter at $1.63 psf and higher of a drop from a year ago when rates where at $1.85 psf. Unknown Outlook for Las Vegas - The DETR reported that since June (2010), the unemployment rate has hovered in the range of 14.2 to 14.4%. Although the Las Vegas market is stabilizing, unemployment rates remain the highest in the country and it will still take many years before the Las Vegas economy fully recovers. Retail Market Indicators Vacancy 13.09% Lease Rates (FSG) Change since Current 4Q09 4Q10 $1.60 NNN Net Absorption* 183,627 Construction N/A *The arrows are trend indicators over the specified time period and do not represent a positive or negative value. (e.g., absorption could be negative, but still represent a positive specified trend over a period.) National and State Employment and Unemployment Overview The worst of the 2007 recession is said to be over and Nevada is said to be showing signs of stabilizing according state officials. The Department of Employment, Training and Rehabilitation (DETR) reported that since June (2010), the unemployment rate has hovered in the range of 14.2 to 14.4%. Although the Las Vegas market is stabilizing, unemployment rates remain the highest in the country at 14.9%, this is rise from last quarters 14.7%. Nevada s unemployment rate also showed a rise from last quarter s 14.4% to 14.5%. According to DETR, at 14.5%, an 2

3 estimated 193,500 Nevadans are unemployed and out looking for work. Hiring in retail, added 1,300 jobs, professional and business services, added 900 jobs, and education and health services, added 500, grew at the end of the year. While manufacturing, a loss of 400 jobs and construction, a loss of 1500 jobs, is still struggling. The Center for Business and Economic Research at UNLV reported that they expect little change in future job growth through the first half of The national unemployment rate is currently 9.4%, a drop from 9.6% we witnessed last quarter. This unemployment rate is equal to roughly 14.5 million unemployed workers that are now drawing unemployment insurance benefits. In November, 21 states recorded unemployment rate increases, however 28 states posted jobless rates significantly lower than the National rate. The highest regional jobless rates were in the Western part of the country, while the Northeast recorded the lowest rates. Nevada continued to show the highest unemployment rates in the nation. The states with the next highest rates were Michigan and California at 12.4 % each and Florida at 12%. North Dakota reported the lowest jobless rate, 3.8 percent, followed by South Dakota and Nebraska, 4.5 and 4.6 percent, respectively. 100,000 80,000 60,000 40,000 20,000 Q308 $40,000,000,000 $30,000,000,000 $20,000,000,000 $10,000,000, Q Retail: Retail Employment vs Vacancy Rate (%) Q109 Q209 Q309 Q409 Q110 Q210 Retail: Clark County Taxable Sales and Vacancy Rate (%) Q Q % 16% 14% 12% 10% 8% 6% 4% 2% 0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 15% 13% 11% 9% 7% 5% 3% 1% -1% ECONOMIC INDICATORS National F GDP Growth -2.6% 2.8% 2.8% CPI Growth -0.3% 1.6% 1.5% Consumer Spending Growth -1.2% 1.7% 2.7% Rental Sales -6.3% 5.9% 5.0% Regional 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Household Income $54,299 $59,038 $65,000 Population 1,952,000 1,956,900 1,964,700 Unemployment 12.10% 14.7% 14.9% Source: Moody s Economy.com Las Vegas 14.9% Nevada % US 9.4% Unemployment rates 4Q10 40,000,000,000 35,000,000,000 30,000,000,000 25,000,000,000 20,000,000,000 15,000,000,000 10,000,000,000 5,000,000,000 0 Las Vegas Retail Market Vacancy Clark County Taxable Retail Sales Overall Vacancy Rates Retail: Clark County Taxable Sales and Inventory Clark County Taxable Retail Sales Base By end of the quarter vacancies finally showed some stabilization from the long four year run of rising vacancy rates. The Las Vegas retail market has approximately 7.27 million square feet of vacant product, which equates to a 13.09% vacancy factor. Aboveaverage vacancies were noted in the Henderson (23.92%), North Las Vegas (18.38%), and East (15.22%) submarkets. By product Inventory (in millions) 3

4 type Strip Centers (19.63%) and Neighborhood Centers (12.86%) retail buildings posted the highest vacancies at the end of the quarter. Nellis at 10.09% and Central West at 10.02% posted the lowest vacancy rates. Net absorption, the measure of space leased from one reporting period to the next, for the 4th quarter showed a positive number again, at 183,627 sf. The Green Valley submarket showed the greatest amount of positive absorption with over 46,577 sf. In fact nine out of the ten submarkets all showed positive absorption. The retailers that have pulled through the recession have enjoyed the wide array of occupancy choices. The old time saying location, location, location really means something right now to the retailers that can make the move to a more premier location as space opens up and rental rates are lowered and become more affordable. 2,000,000 1,000,000 - (1,000,000) (2,000,000) (3,000,000) (4,000,000) 60,000,000 55,000,000 50,000,000 Q4 06 Q1 07 Q2 07 Retail: Quarterly Absorption (SF) Q3 07 Q4 07 Q1 08 Q2 08 Q308 Q408 Q109 Q209 Q309 Q409 Retail: Inventory (SF) and Vacancy Rate (%) Q110 Q210 Q310 Q % 14.0% 12.0% 10.0% 15% 14% 13% 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Retail: Quarterly Vacancy Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 45,000,000 40,000,000 35,000,000 30,000,000 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q308 Quarterly Inventory Q408 Q109 Q209 Overall Vacancy Rates Q309 Q409 Q110 Q210 Q310 Q % 6.0% 4.0% 2.0% 0.0% 4

5 Retail Space Vacancy Rates Summerlin, 10.74% Central East, 14.07% Northwest submarket at $1.76 sf/fsg from $1.87 sf/fsg. The remaining submarkets had slight changes in rates showing that asking lease rates are also starting to become stable. Southwest, 13.22% Northwest, 10.24% Central West, 10.02% East, 15.22% Note: The average asking rates do not take in consideration free rent & rental concession $3.00 Retail: Quarterly Asking Lease Rates North Las Vegas, 18.38% Nellis, 10.09% Henderson, 23.92% Green Valley, 11.03% $2.50 $2.00 $1.50 $1.00 Retail Vacancy Rates by Product Type $0.50 Q4 07 Q1 08 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q % 20.00% $2.50 Retail: Yearly Rental Rates $ % $ % $ % $ % Q209 Q309 Q409 Q110 Q210 Q310 Q410 Community Centers Neighborhood Centers Anchorless Strip $ Pricing (Average Asking Rents) Average asking rents witness another decline to $1.60 per sf/mo NNN during 4th quarter This is the lowest asking lease rate that we have seen since 2004 when the rate was $1.62 per sf/mo NNN. The low rental rates could be playing a role in the new leasing momentum that we are starting to witness and helping retailers into spaces they could not afford before. Elevated tenant improvement allowances and free rent concessions are also impacting returns for landlords and ultimately lenders. We expect this trend to continue throughout most of 2011 as inventory levels remain elevated. The submarkets were divided with half of the market showing asking rental rates decline and the other half showing asking rental rates increases. The highest declines in asking rental rates were in the Green Valley submarket at $1.46 sf/fsg from $1.57 sf/fsg, Henderson submarket at $1.92 sf/fsg from $1.97 sf/fsg and 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Central East $1.52 Central West $1.28 Retail: Vacancy (%) and Ave. Lease Rates $1.43 East Green Valley $1.46 Henderson $1.92 New Supply (Completions) and Market Demand Developers have halted many projects resulting in no new construction completions during 4th quarter. With the continued hesitation of developers to build product, due to scarce construction financing and weak rents, we also don t expect much of the planned $1.47 Nellis North Las Vegas $1.62 Northwest $1.76 Southwest $1.70 $1.88 Summerlin $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 5

6 product to come online any time soon. Future new supply levels will continue to shrink as market corrections are underway. It may take another five years for the housing market to become stable, credit to start flowing and employment to become active again before any rise in construction numbers. For a smart recovery, the retail market needs to solve the imbalance of supply and demand by allowing existing vacant space to be absorbed and wait out this business cycle before any major growth should happen. that the Health Care reform bill will be making. Square Feet Las Vegas Retail Overview YTD 9,000,000 8,000,000 7,000, % 6,000,000 5,000,000 4,000, % 3,000, % 3.71% 2,000, % 13.09% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% Vacancy 1,000, % Outlook 0 Year Ave Lease Rate $1.75 $1.92 $2.04 $2.15 $1.85 $ % Base * Sf Millions The end of the year numbers really showed a marketing that is stabilizing. Vacancy is not rising and lease rates are not falling as fast as we had witnesses at the beginning of Although we still expect to see a slow recovery, since more than 50 big box retailers closed up shop since 2007, we are hoping that consumer confidence remains positive. Consumers are also more watchful of their spending habits and are looking for values. So we are hopeful that discount retailer s such as, Ross, Wal-Mart, TJMax, Burlington Coat Factory, Hobby Lobby, and Safeway s, to name a few, will take charge and help lease up some of the vacant big box space and start to really turn the retail market around in the next three to four years. In addition to these national players we are also seeing a trend in regional chains and Hispanic grocers starting to expand in the market. Another trend that is to be watch for in the coming years is the trend of turning vacant retail space into medical uses. With Retail locations offering ideal parking, good visibility and signage, and shopping centers now at a much more affordable rate, it could be a great option for medical office users. The medical profession is expected to see large growth as a result from the expected changes RULES FOR MARKET REVIEW Only existing properties, for lease >=10,000 square feet are included in the market reviews Type Built Vacant Inventory Vacancy Note: Due to reclassifications of, and adjustments to, data between reporting periods, the commercial market data for the latest quarter may not necessarily be comparable to a previously reported quarter. Regional Mall Enclosed Mall Regional Center >= 350,000 Sf Community Center...>= 100,000 And <= 349,999 Sf Neighborhood Center...>= 50,000 And <= 99,999 Sf Anchorless Strip <= 49,999 Sf Freestanding...Freestanding 6

7 Commerce Real Estate Solutions Las Vegas Retail Market Report Q Inventory Vacancy Demand & Supply Pricing No. of Existing Under Const. Planned Vacancy Net Gross New Asking Rent (NNN) Bldgs. SF SF SF SF Rate Absorption Spaced Supply Low High Weighted Avg. Central East Community Centers 20 3,485, , % $0.50 $3.00 $1.55 Freestanding 5 204, % Neighborhood Centers 6 492, , % (165) 1,035 - $0.90 $3.75 $1.68 Anchorless Strip 41 1,526, , % 5,775 8,447 - $0.50 $3.00 $1.34 Total 72 5,709, , % 5,610 9,482 - $0.50 $3.75 $1.52 Central West Community Centers 28 4,580, , % 8,859 8,859 - $0.65 $3.25 $1.35 Freestanding 6 512, , % $0.65 $1.60 $1.42 Neighborhood Centers 16 1,241, , % 2,957 2,957 - $0.60 $2.50 $1.28 Anchorless Strip 42 1,479, , % 32,486 33,602 - $0.50 $2.50 $1.07 Total 92 7,813, , % 44,302 45,418 - $0.50 $3.25 $1.28 East Community Centers 16 2,532, , % 32,957 32,957 - $0.49 $3.50 $1.50 Freestanding 3 113, % Neighborhood Centers 2 181, , % $1.50 $1.50 $1.50 Anchorless Strip , , % 12,221 12,221 - $0.50 $2.00 $1.30 Total 33 3,230, , % 45,178 45,178 - $0.49 $3.50 $1.43 Green Valley Community Centers 33 7,442, , % 20,915 21,695 - $0.35 $4.00 $1.80 Freestanding 3 263, , % $1.00 $1.00 $1.00 Neighborhood Centers 22 2,055, , % 20,727 20,727 - $0.50 $2.50 $1.57 Anchorless Strip , , % 4,935 4,935 - $0.75 $3.00 $1.48 Total 86 10,611, ,170, % 46,577 47,357 - $0.35 $4.00 $1.46 Henderson Community Centers 10 1,954, , % 14,600 14,600 - $0.50 $4.00 $1.63 Freestanding Neighborhood Centers 3 295, , % $2.00 $2.50 $2.25 Anchorless Strip 7 347, , % 1,603 1,603 - $0.50 $3.50 $1.89 Total 20 2,597, , % 16,203 16,203 - $0.50 $4.00 $1.92 Nellis Community Centers 8 1,235, , % 4,431 4,431 - $0.85 $2.55 $1.41 Freestanding 2 100, % Neighborhood Centers , , % $0.50 $3.25 $1.60 Anchorless Strip , , % $0.70 $3.50 $1.40 Total 37 2,770, , % 4,431 4,431 - $0.50 $3.50 $1.47 North Las Vegas Community Centers 25 4,917, , % $0.50 $3.75 $1.98 Freestanding Neighborhood Centers 16 1,444, , % 5,486 5,486 - $0.65 $2.75 $1.61 Anchorless Strip , , % $0.49 $3.50 $1.26 Total 56 6,877, ,264, % 5,990 5,990 - $0.49 $3.75 $1.62 Northwest Community Centers 17 3,451, , % 1,200 1,200 - $0.81 $3.15 $1.84 Freestanding Neighborhood Centers , , % 2,521 2,521 - $0.95 $3.25 $1.87 Anchorless Strip , , % 10,367 10,367 - $0.90 $3.25 $1.57 Total 48 4,518, , % 14,088 14,088 - $0.81 $3.25 $1.76 Southwest Community Centers 15 4,217, , % 1,200 1,200 - $0.95 $3.50 $1.90 Freestanding Neighborhood Centers , , % $1.00 $2.55 $1.58 Anchorless Strip 45 1,645, , % $0.50 $4.25 $1.63 Total 70 6,825, , % 2,040 2,040 - $0.50 $4.25 $1.70 Summerlin Community Centers 18 3,595, , % (792) - - $0.75 $3.50 $2.12 Freestanding % Neighborhood Centers 8 532, , % $0.80 $3.00 $1.83 Anchorless Strip , , % $1.00 $3.00 $1.68 Total 45 4,639, , % (792) - - $0.75 $3.50 $1.88 Las Vegas Total Community Centers ,413, ,511, % 83,370 84,942 - $0.35 $4.00 $1.71 Freestanding 19 1,194, , % $0.65 $1.60 $1.21 Neighborhood Centers 112 8,817, ,133, % 31,526 32,726 - $0.50 $3.75 $1.68 Anchorless Strip 238 8,170, ,603, % 68,731 72,519 - $0.49 $4.25 $1.46 Total ,595, ,276, % 183, ,187 - $0.35 $4.25 $1.60 7

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9 Commerce full service commercial real estate solutions Commerce Real Estate Solutions has been among the top commercial real estate brokerage firms in the Intermountain West for over 30 years. From our headquarters in Salt Lake City and offices in Provo/Orem, Clearfield and St. George, Utah, Las Vegas, Nevada and Seattle and Bellevue Washington we offer a full range of brokerage services, valuation and consulting, client representation and property/facility management. Our alliance with Cushman & Wakefield extends our reach worldwide. Meeting your real estate objectives is our number one goal at Commerce Real Estate Solutions. Whether you re looking to lease, own, develop or sell commercial properties, we have the team of professionals to get it done for you. Our seasoned agents are recognized both regionally and nationally for their first-rate performance; and because of their success, they tend to stay with our company longer. The average tenure of Commerce agents is one of the longest in the industry. Cushman & Wakefield is the world s largest privately-held commercial real estate services firm. That means you re getting an experienced agent when you do business with us. You re also gaining access to our Information Services Group, which includes our Geographic Information System (GIS), the industry standard-bearer in mapping, Graphic Design and Marketing, and Research. At Commerce we have a complete understanding of the real estate market. Our comprehensive database allows our agents to feel, track and analyze every movement in the industry and to see opportunities as soon as they arise. Combine this with the global resources of Cushman & Wakefield and you get the most innovative and progressive real estate brokerage in the Intermountain West: Commerce Real Estate Solutions. Doing business in a brisk and nuanced marketplace is complex and difficult. We can help. Our experience, knowledge, innovative thinking, networking infrastructure and unmatched service make Commerce the clear choice for your commercial real estate needs. Cushman & Wakefield Cushman & Wakefield is the world s largest privately-held commercial real estate services firm. Founded in 1917, it has 231 offices in 58 countries and 15,000 employees. The firm represents a diverse customer base ranging from small businesses to Fortune 500 companies. It offers a complete range of services within four primary disciplines: Transaction Services, including tenant and landlord representation in office, industrial and retail real estate; Capital Markets, including property sales, investment management, valuation services, investment banking, debt and equity financing; Client Solutions, including integrated real estate strategies for large corporations and property owners, and Consulting Services, including business and real estate consulting. A recognized leader in global real estate research, the firm publishes a broad array of proprietary reports available on its online Knowledge Center at 9

10 Las Vegas retail Team Robin Civish, CCIM Liz Clare, CCIM Dan Hubbard Todd Manning Michael McDay Jacqueline Young 10

11 GIS / Mapping Department The GIS / Mapping services group provides our agents and clients with the most current information available. Using GIS (Geographic Information Services) allows our clients a unique opportunity to visualize where their property is located. Additional market information includes: Daily traffic count information Local drive times Demographic information Population growth Major tenants in the region and trade areas medical office, industrial and retail properties. In addition to tracking local properties, the research team prepares quality market reports and research economic and demographic trends. Working in tandem with the other office specialty support groups such as mapping, graphic design and marketing, the Research team strives to provide timely and quality information to enable Commerce professionals to better serve their clients. Marketing Department The graphic design department at Commerce Real Estate Solutions employs eight full time department is to provide our agents with whatever materials necessary to successfully market their projects. This resource allows us to vividly show the retail prospect why they need to be located in a certain segment of town. This department uses the latest in Adobe design programs, and is integrated with our mapping and research departments. Web: Commerce Real Estate Solutions was at the forefront in the use of the World Wide Web by commercial real estate firms and has maintained a web site for over ten years. All Some clients that have benefited from our mapping / GIS technology are; Wal-Mart, JoAnn s, Carmax, Toys-R-Us, Discount Tire, Lowe s Home Improvement, Shoe Carnival, Chase Bank, Staples, PacifiCorp, GSA, Intel, Fidelity Investments, Social Security Administration, Salt Lake City School District and JP Morgan Bank. Commerce Real Estate Solutions is a regional real estate firm with international ties, dedicated first and foremost to our clients. With the industry s premier professionals, and industry leading technology, our mission is to exceed our clients expectations through service excellence. Research Department The Commerce Real Estate Solutions Research team is charged with tracking the Utah, Nevada and Seattle commercial real estate markets and providing current market information. With access to industry databases and prime real estate tools, the research team is well-equipped to support the information needs of the local offices. The Las Vegas researcher tracks leasing activity for 182 million square feet of office, graphic designers. Each of our designers has a number of years of experience. Chris Valentin, the design director, has been with Commerce Real Estate Solutions for over fourteen years, and along with Matt Liapis, who has taught graphic design and mapping at the University of Utah. Our Las Vegas office consists a team of two well trained and professional designers with a combined 12 plus years of experience. The founding principal behind the design of our commercial properties are listed and searchable by use, size, price, and location. In addition to commercial properties, our Web site has agent profiles, information about Commerce Real Estate Solutions offices throughout the intermountain west, a company history, and links to valuable information including a link to the Cushman and Wakefield Web site. The Web site also has downloadable copies of all our Market Reviews dating back to

12 Commerce Real Estate Solutions 3800 Howard Hughes Parkway, Suite 1200 Las Vegas, NV (T) (F) , Commerce Real Estate Solutions. Disclaimer: The above information is given with the obligation that all negotiations relating to the purchase, renting, or leasing of the property described above shall be conducted through Commerce Real Estate Solutions. No warranty or representation, express or implied, is made as to the accuracy of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other encumbrances, withdrawal without notice, and to any special listing conditions imposed by the seller. Prospective buyers should conduct their own due diligence. Some aerial photography by DigitalGlobe or Aerials Express.